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China Dongsheng International Announces Fiscal Year 2008 Second Quarter Financial Results

NEW YORK, Feb. 20 /Xinhua-PRNewswire-FirstCall/ -- China Dongsheng International, Inc. (OTC Bulletin Board: CDSG), a leading developer and manufacturer of nutritional supplements and personal care products provider in China, today announced the Company's financial results for the fiscal year 2008 second quarter ended December 31, 2007.

-- Company's strategic plan realizes initial results of manufacturing its

own branded products in-house.

-- Second quarter gross profit increases 39% to $8.51 Million

-- Gross margin improves to 85% from 58% versus prior comparable period

-- Net income increases 12% to $4.33 Million quarter over quarter as the

net margin improves to 43.2% from 36.8%.

"We continue to execute our strategic plan to vertically integrate operations and focus on our own branded products. We are pleased to be able to increase our net earnings during this transition period while dramatically improving our gross margins," said Mr. Aidong Yu, Chairman of China Dongsheng International, Inc. "Moreover, we expect to see continued significant growth in profits from our branded products in the coming quarters as we continue to roll-out new production lines at our manufacturing facilities. With our extensive distribution, strong demand for our branded products, expanded R&D team, and our GMP certified manufacturing facilities, the Company is becoming increasingly well positioned to capitalize on the growth of the healthcare market in China"

Second Quarter Fiscal Year 2008 Results

Net sales for the fiscal year second quarter ended December 31, 2007 totalled $10.01 million and were relatively unchanged compared to the total of $10.49 million in the same period in 2006. This largely reflects our focus on our higher margin branded products manufactured in-house and discontinuing the distribution of certain lower margin products from third parties.

We sold 676,462 units of our Chitosan based branded products for the three month ended by December 31, 2007 compared to 231,172 units in the previous period of 2006. The sales of our branded products increased 159% to $9,405,036 from $5,612,729 in the previous period in 2006.

The increase in our branded product revenues was offset by our decision to no longer distribute lower margin third party products including ozone purifiers. Accordingly, we discontinued the supply relationship with Harbin Jiujiu Ozone Purifier Co. as we plan to bring the manufacturing in-house. However, as of December 31, 2007, the new product line was not yet completed.

Compared to the corresponding period in 2006, cost of goods sold decreased by $2,904,833, or 66% for the three months ended December 31, 2007. The decrease is due in the lowered raw material purchase expenses. Dongsheng began manufacturing its own branded products and was able to drastically reduce the cost of the raw materials by negotiating more favorable terms with suppliers. This planned shift in production has considerably reduced our cost of goods sold and generated the improved gross margin.

Gross profit margin increased to 85% for the three months ended December 31, 2007, compared to the three months ended December 31, 2006 of 58%. This increase is primarily due to the lower cost of goods sold which results from our in-house manufacturing capabilities as well as the improved revenue mix.

Operating expenses were $2,281,877. Dongsheng accounted for $1,690,347 while Paperclip accounted for $591,530 compared to $403,606 for the quarter ended December 31, 2006.

Operating expenses increased by $1,878,271 for the quarter ended December 31, 2007. This increase in total operating expense is part of Dongsheng's plan to strengthen its management and maintain its core sales force. We have supplemented our sales force with fixed salaries in addition to their commissions in an effort to provide additional incentives to the current and future sales force as we focus on our branded products.

Net income for the fiscal year second quarter ended December 31, 2007 increased 11.8% to $4,326,248 million compared to $3,866,700 million for the same period 2006.

On the balance sheet, total net assets for the fiscal year second quarter of 2008 were $49.4 million.

About China Dongsheng International, Inc.

China Dongsheng International, Inc., through its 100%-owned subsidiary, Jilin Dongsheng Weiye Science and Technology Development Co., Ltd, is engaged in the development and manufacture of nutritional supplements and personal care products domestically in China. The Company sells these products through approximately 200,000 distributors (with 18,000 full time salespersons) and 2,500 retail outlets (with over 400 exclusive franchise stores) in twenty-six provinces throughout China.




December 31, 2007


Current assets:

Cash and cash equivalents $817,151

Accounts receivable - net of allowance for

doubtful accounts of $40,000 230,435

Inventory 65,418

Prepaid expenses 275

Advances to suppliers 301,712

Other receivable 8,506

Total Current Assets 1,423,497

Property and equipment, net of

accumulated depreciation of $653,051 43,158,276

Other assets:

Investment advance 7,328,708

Deposit on land 2,878,842

Land use right, net 2,792,952

Total Other Assets 13,000,502

Total Assets $57,582,275


Current liabilities:

Accounts payable $730,872

Unearned revenue 770,400

Taxes payable 6,077,033

Accrued expenses and other payables 558,461

Total Current Liabilities 8,136,766

Notes payable - related party 11,210

Total Liabilities 8,147,976

Stockholders' Equity

Common stock, $0.001 par value, 100,000,000 shares

authorized; 31,546,134 shares

issued and outstanding at December 31, 2007 31,546

Additional paid in capital 1,259,847

Accumulated other comprehensive income 2,490,430

Retained earnings - Appropriated 1,218,086

Retained earnings - Unappropriated 44,434,390

Total Stockholders' Equity 49,434,299

Total Liabilities and Stockholders' Equity $57,582,275




For the six and three months ended December 31, 2007 and 2006

Six-Month Ended Three-Month Ended

December December December December

31, 2007 31, 2006 31, 2007 31, 2006

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Sales $18,389,721 $18,366,646 $10,005,710 $10,493,470

Cost of Sales 4,448,761 7,640,472 1,497,256 4,402,089

Gross Profit 13,940,960 10,726,174 8,508,454 6,091,381

Operating Expenses

Selling, general

and administrative 2,818,527 485,248 2,281,877 403,606


income 11,122,433 10,240,926 6,226,577 5,687,775

Other Income and


Interest income 5,795 35 2,539 23

Other income

(expense) -- 166,142 1,310 89,416

Total Other Income 5,795 166,177 3,849 89,439

Income Before Income

Taxes 11,128,228 10,407,103 6,230,426 5,777,214

(Benefit) provision

for Income Taxes

Income tax

benefit (19,392,018) -- -- --

Provision for

income taxes 3,550,184 3,434,344 1,904,178 1,910,514

Total (benefit)

provision for

income taxes (15,841,834) 3,434,344 1,904,178 1,910,514

Net Income 26,970,062 6,972,759 4,326,248 3,866,700

Safe Harbor Statement

The statements contained herein that are not historical facts are 'forward-looking statements' within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as 'believes,' 'expects,' 'may,' 'will,' 'should,' or 'anticipates' or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, our statements regarding the potential growth of the markets are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including but not limited to, general economic conditions and regulatory developments, not within our control. The factors discussed herein and expressed from time to time in our filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed or implied by such statements. The forward-looking statements are made only as of the date of this filing, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

For more information, please contact:

Peter D. Zhou

Tel: +1-212-232-0058

SOURCE China Dongsheng International, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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